The “give away your music, make it up on tour and merchandise” model only works for outliers in the music business. It works for bands with little or no profile, who aren’t giving up music sales to begin with. It also works for big, aging acts that have sold plenty of records in the past, but fewer in recent years. Pollstar’s list of top touring acts of 2006, for instance, was dominated by oldies whose CD-selling days are long behind them: The Rolling Stones, Barbara Streisand, Elton John, etc. Meanwhile, don’t forget that, to get to this stage, Radiohead received plenty of support — and money — from its former label EMI.
Radiohead: 1.3 Mil Downloads! (But Big Music Not Dead) - Silicon Alley Insider

Meow!